World Bank Study Finds Better Targeting Can Boost Women Entrepreneurs

A new World Bank working paper suggests that better targeting can improve the effectiveness of business development programs for women entrepreneurs without changing their content. The study finds that the benefits of business training, mentorship and consulting depend partly on selecting participants who are ready to apply the support to their businesses.

Governments and development organizations invest billions of dollars annually in business upgrading programs designed to help small firms grow. However, while these programs generally improve business performance among men, the average returns for women entrepreneurs are statistically indistinguishable from zero. The paper proposes a more cost-effective approach that focuses on participant selection rather than increasing spending or redesigning program content.

The research is based on pooled experimental data from 2,595 entrepreneurs in Uganda, South Africa and Mexico. If there is no selection for the business upgrading support, male entrepreneurs see significant benefits in firm performance, while female entrepreneurs do not see any statistically detectable benefits. Average program cost is US$758/participant.

Key Highlights:

• Better targeting can improve business program outcomes for women entrepreneurs
• The PRS identifies women who are ready to benefit from business support
• The paper recommends tailored support and better funding for women-led businesses

To grasp this difference, researchers created the Program Readiness Scorecard (PRS), a total of 100 points evaluation involving 10 perceived behaviors and practices called the “10 Es.” It assesses three aspects: credit constraints, baseline business skills and growth attitudes. The assessment takes into account such things as access to resources, business experience, effectiveness, experimentation and external orientation.

The scorecard does not use current profits or firm size to determine readiness, helping avoid the exclusion of smaller businesses with growth potential.

The returns for women are statistically significant when the PRS is applied as a gender-neutral screening tool, eliminating the lowest scoring, without distinction by gender. But the returns of men are still around two times larger.

The paper suggests structural barriers make up part of this difference. On the PRS score, men score an average of 55.2, while women score an average of 51.4. The gap is due to women's relatively limited access to capital, managerial experience and professional networks, not to their inherent abilities.

The treatment effects achieved by these women are almost as large as the average male entrepreneur. This difference in returns is only 0.013 standard deviations, and is statistically insignificant at a p-value of 0.892. Women not in the threshold continue to show returns that are not statistically different from zero.

These outcomes indicate that the differential effectiveness of the program is not the result of women's capacity to be helped by a business program, but rather a result of the selection of program participants.

The paper makes three policy recommendations. First, high-readiness women entrepreneurs could be an under-served segment in the private business development service providers and consulting firms market. These women are able to earn back the average program cost in about four months, just like men.

Secondly, the PRS could be leveraged by development finance institutions and grant programs to separate out businesses that are investment-ready from those that are not, without needing to consider firm size or revenue. This might lead to the allocation of resources to more capable women run businesses, which otherwise may not have been considered.

Third, if an entrepreneur's readiness score is lower, they might need basic support prior to intensive business upgrading. The scorecard could be used as a diagnostic tool to determine individual barriers and direct appropriate support.

Overall, the paper calls for a multi-layered strategy of providing basic support and intensive programs for those entrepreneurs who are ready to benefit, further to this, it suggests a better utilization of the available resources and more opportunities for women entrepreneurs.